What’s Next for AT&T?

Frustrated with its growth prospects in the United States, AT&T (NYSE:T) could be looking across the Atlantic for a telecom acquisition before the end of 2013.ATT-logo

People “familiar with the company’s thinking” told the Wall Street Journal that the Texas-based carrier thinks there might be a unique opportunity for a strategic acquisition in Europe. AT&T’s growth prospects at home hit a brick wall when antitrust authorities denied its $39 billion proposed takeover of T-Mobile USA.

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Size matters in the wireless industry, and in the telecom jungle, Verizon Wireless (NYSE:VZ) is king. Verizon controls most of the industry’s contract customers, which are not just lucrative but reliable. AT&T saw some success in 2012 generating more profit and convincing customers to opt-in for wireless data plans, but domestic growth prospects remain limited.

Softbank’s acquisition of Sprint Nextel (NYSE:S) is another road block. If Sprint is successful in its bid for spectrum rights from Clearwire (NASDAQ:CLWR), then AT&T could find itself forced to turn to a more diversified set of offerings to sustain growth…

So AT&T it turning its attention overseas and scoping out acquisition prospects, but many investors and industry observers are uncertain it will find any success. A past bid for a stake in Telecom Italia and other interests in India have failed.

The European market is dominated by fiercely competitive national players and an entirely new set of regulators to contend with. An overseas acquisition wouldn’t net the same synergies that domestic mergers do, reducing the relative value of every dollar invested.

“The logic of diversifying into European telecom as a solution for a growth deficit in the U.S. is [un]clear,” wrote a Bernstein Research analyst in a note, according to Forbes. “If growth in the U.S. looks poised to stall, growth in Europe already has.”

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